Question

Karl Corporation was organized on January 2, 2018. During 2018, Karl issued 40,000 shares at $24 per share, purchased 6,000 shares of treasury stock at $26 per share, and had net income of $600,000. What is the total amount of stockholders’ equity at December 31, 2018?

Answer 1

$1,404,000

Step-by-step explanation:

To calculate the total amount of stockholders’ equity at December 31, 2018 you have to use the following formula:

Stockholder’s equity= Paid-up capital+Retained earnings-Treasury stock

Paid-up capital= $24*40,000= $960,000

Retained earnings= $600,000

Treasury stock= $26*6,000= $156,000

Now, you can replace the values on the formula:

Stockholder’s equity= $960,000+$600,000-$156,000

Stockholder’s equity= $1,404,000

According to this, the total amount of stockholders’ equity at December 31, 2018 is $1,404,000.